Cryptocurrency analysis: how to use it for better
Trading cryptocurrencies poses numerous challenges and chances of downfall. Having to avoid scams, fake coins and fraudulent whitepapers, just to name a few difficulties, is overwhelming. Also, having to find the most likely to grow cryptocoin is no easy task. To succeed in this field, investors need to look for reliable tools and approaches of cryptocurrency analysis.
Because of its volatile nature, crypto coins are often seen as a risky investment. That is why both traders and HODlers should know how to analyze the market, its trends and the tokens themselves. Furthermore, it is imperative that they get in touch with the best techniques and approaches to do so, such as the fundamental and the technical analysis of cryptocurrencies.
Cryptocurrency and market analysis
The vast amount of cryptocoins available in the market is a huge challenge for an unexperienced trader. How to find the most potentially profitable one? How to spot and avoid scammers?
Extensively learning about all coins is an impossible task. To make matters worse, there are, among them, some “meme” currencies, such as Dogecoin. These are even more volatile — a single celebrity’s tweet is enough to make its price skyrocket or the opposite. How to proceed, then?
In such an uncertain terrain, so that the trader can make the best decision in each investing scenario, both cryptocurrency and market analysis are necessary. Assessing the team behind the coin or token, checking the token’s whitepaper, observing the market trends in recent and older times are just a few strategies the investor should have at hand.
In the cryptocurrency trading market, two long-lasting tools are widely used, namely the fundamental analysis and the technical analysis of cryptocurrency. Although they are way older than cryptocurrencies and differ in origins and approaches, they can help both beginning and experienced investors.
How to do fundamental cryptocurrency analysis
In 1934, Benjamin Grahan and David Dodd introduced the concept of the fundamental analysis of assets. Since then, it has been widely used in many financial fields, including the stock trades. In the cryptocurrency market, this tool has been used to make the trader give importance to the external facts, history, variables and other factors that affect a coin or token.
The assessment can be done in a top-down approach or in a bottom-up one. The first focuses on the macroeconomic variables as a starting point, such as the global economic situation. The latter focuses on the microeconomic variables, such as studying the performance of companies with growing potential, before checking the macroeconomic information.
Starting either on the world economic situation or on the most attractive growing companies within a chosen country, both approaches empower the trader with a wider look before deciding on which cryptocurrency to invest. External information adds to the internal market reality. The coin or token’s authenticity and objective value within a historical context are, therefore, used for the investment success.
Its downside is that the best analysis come from the necessary extensive knowledge, which means it takes some time to gather all the information. In a rapidly evolving market such as the cryptocurrency one, that can mean the loss of a perfect investment moment. Nonetheless, its good points balance it.
How to do technical cryptocurrency analysis
If fundamental analysis relies on external data to help traders make their decision, the technical analysis, on the contrary, focuses on mathematical indicators, price patterns and other tools in a way to predict the cryptocurrency chance of growth.
This kind of analysis derives from the Dow Theory, proposed by the Dow Jones Company co-founder and first The Wall Street Journal editor Charles Dow. It relies on some principles. First, the coin’s price will reflect everything that may have impact on its value, being it global or local. Second, investors must see the market as trending. Also, trends can go upward, downward or even lateral. Lastly, because human behavior is repetitive, their psychology can be predicted and it, too, is likely to influence a token’s price.
There are two categories of technical analysis of cryptocurrency. The first one, chart analysis, heavily relies on data shown in graphics and charts. Just to name one of those charts, the Japanese Candlestick, which is widely used, shows trading information over a single period of time. It, thus, empowers the trader with intensive knowledge about the token’s commercial activity over a minute, hour, day etc.
The other category of this analysis solely relies on technical information, such as formulae and statistics. To analyze the cryptocurrency using this approach, the investor must scrutinize the market’s trends, its momentum, the token’s volatility, and, finally, the volume of the market. These four indicators combined give the trader the knowledge to predict with a certain level of success if a certain coin value will go up or down.
This approach’s major downside is that some parts of the market are completely unpredictable. There is not an analysis that can be 100% effective. It can only give some more confidence to the investor in a coin’s future.
The best crypto signals for now
Researching the markets all by yourself can be overwhelming. Traders must do external research to spot possible scammers, research the cryptocurrency history in the market and read various tables and graphics. All that just to find the best possible crypto signals for a successful investment. If you want to try it yourself, you can rely on our article on crypto signals to guide you.
However, doing all that work by oneself is too time and energy-consuming. Therefore, traders often rely on crypto signal groups. Those groups are supported by renowned and experienced crypto trading professionals. They do all the hard work and indicate the best crypto signals for the moment.
The Fat Pig Signals has numerous professionals to help you analyze cryptocurrencies and trade them like a pro. With over 15 years of experience in trading, our experts have been in the crypto market since 2017. Do not forget to join our group.